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By: David P. Riesenberg | April 13, 2014 - 10:20am

The panel’s moderator, Professor Frederick M. Abbott, opened the discussion by recalling that intellectual property rights may fall within the definition of “investment” set forth in many bilateral investment treaties (“BITs”) and free trade agreements (“FTAs”). He also drew attendees’ attention to Article 1139(g) of the North American Free Trade Agreement (“NAFTA”), which specifically identifies “intangible” property “acquired in the expectation or used for the purpose of economic benefit or other business purposes” as a covered investment. Because covered investments are subject to the substantive and procedural protections of NAFTA’s Chapter 11, tribunals are necessarily faced with deciding whether patents are covered as well. Professor Abbott then asked the panelists to give their views on the recent treatment of intellectual property rights under trade and investment law.

One of the panelists, Professor Jerome H. Reichman, focused his presentation on the facts of Eli Lilly and Company v. The Government of Canada, in which the claimant argues that Canada has expropriated certain of the claimant's drug patents in violation of NAFTA. In particular, Professor Reichman criticized the claimant’s argument that Canada’s “doctrine of sound prediction” deviates from international norms for patent protection. As the Supreme Court of Canada explained in Apotex Inc. v. Wellcome Foundation Ltd., [2002] 4 S.C.R. 153, this doctrine requires the patent application either to demonstrate the patent’s utility at the time of the application or to make a sound prediction about its future utility. The adoption of this doctrine, in the claimant’s view, has caused harm to the claimant’s investment in violation of NAFTA. According to Professor Reichman, however, Canada’s standards do not meaningfully deviate from international norms. In support, Professor Reichman cited parallel standards applied in the United States, Europe, and many other jurisdictions.

A second panelist, Professor Susan K. Sell, described four other instances where pharmaceutical companies have either brought lawsuits or lobbying pressure against the governments of the Philippines, India, South Africa, and Thailand to protect their claims to certain drug patents. In Professor Sell’s view, these tactics have undermined national sovereignty and democratic control over public health. Professor Sell also criticized the secrecy that ordinarily surrounds trade and investment negotiations, which prevents NGOs and even legislators from informing the public about FTAs and BITs until the draft text has been negotiated and published.

Another panelist, James Love, the Director of Knowledge Ecology International, joined Professor Sell in criticizing pharmaceutical companies’ conduct particularly with respect to investor-State dispute settlement. Mr. Love noted the lack of clarity in treaty texts and remarked on the potential for regulatory chill as domestic policymakers attempt to avoid violations of BITs and FTAs. Mr. Love also criticized the lack of meaningful opportunities for consumers to participate in international dispute settlement.

The fourth commentator, Professor Gary N. Horlick, suggested that tobacco companies may be initiating disputes under FTAs and BITs as a delaying tactic to forestall anti-tobacco regulation. In particular, Professor Horlick cited the pending claims brought by Philip Morris against Australia and Uruguay before investor-State tribunals, which are premised in part on the effect of these States’ anti-tobacco regulations on the tobacco company’s trademarks. Professor Horlick also cited the WTO disputes initiated by Ukraine, Indonesia, and Honduras, which also challenge Australia’s "plain packaging" regulation of tobacco products.

As a caveat, Professor Abbott acknowledged that the views of the panel were somewhat one-sided, but noted that the panel had reached out to representatives of certain pharmaceutical companies and Eli Lilly’s lead counsel for the NAFTA arbitration. As Professor Abbott explained, these invitees had declined the offer to attend and respond to the panel with their own views.

David P. Riesenberg is currently a law clerk at the United States Court of Appeals for the Fifth Circuit. He has previously worked at White & Case LLP in the international arbitration practice.